by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

The Reporter for this case is Professor Cyril Fox of the University of
Pittsburgh.

LANDLORD/TENANT; QUIET ENJOYMENT: A breach of the implied covenant of
quiet enjoyment does not require a finding that the breach was so
severe as to amount to a constructive eviction to afford the tenant
relief; and the tenant may be entitled to damages for interference
with possession which does not amount to exclusion from possession.
Echo Consulting Services Inc. v. North Conway Bank, 669 A.2d 227 (N.H.
1995).

Tenant leased space in a lower floor of a building which was later
acquired by the Bank as landlord. The Bank undertook a series of
renovations to make the building suitable for its business purposes.
Construction activity interfered with the tenant's access to its
leased space. The tenant asserted that this and other conduct of the
landlord amounted to partial actual eviction, constructive eviction,
and breach of the lease as a violation of the implied covenant of
quiet enjoyment.

The Supreme Court of New Hampshire affirmed the finding below that
there was no actual partial eviction because the tenant still had
access, although less convenient access, to its leasehold.

But the court rejected the landlord's claim that a constructive
eviction requires that the premises be rendered unfit for occupancy or
that the landlord permanently interfere with the tenant's beneficial
use and enjoyment of the premise. Instead, the court found that a
breach of the covenant of quiet enjoyment occurs whenever the landlord
"substantially interferes with the tenant's beneficial use and
enjoyment of the premises." This interference need not rise to the
level of a constructive eviction to be actionable by the tenant.
Prior New Hampshire constructive eviction cases essentially involved
severe interference essentially denying tenant all use and enjoyment.
The court states that this view of the covenant of quiet enjoyment is
too narrow for today's society. Where the landlord's conduct deprives
the tenant of "expectations under the lease and reduce[s] the value of
the lease" fairness may require an award of compensatory damages
without total interference with use and enjoyment.

Reporter's Comment: This case departs substantially from the
traditional view that breach of the implied covenant of quiet
enjoyment requires the tenant to vacate the premises under a claim of
a constructive eviction. Here, the tenant may remain in possession
and seek damages if the landlord's conduct interferes with the
tenant's legitimate expectations under the lease. The court appears
to be creating for commercial tenants a right similar to that granted
residential tenants under the implied warranty of habitability, which
similarly permits the tenant to remain in substandard premises and
recover damages.

Editor's Comment 1: Note that the court never clearly identifies the
nature of the landlord's breach here. It states that the loss of
access to the front door did not breach the specific lease covenant
for access. It rejects any notion that the tenant's employees
actually were blocked from getting to the premises. Apparently the
appeals court is remanding to the trial court the question of whether
the general construction activity maintained by the landlord on its
adjacent premises unreasonably interfered with the tenant's use and
enjoyment of its own premises. Although it cites other cases
discussing landlords who failed to control noisy fellow tenants and
landlords who actually blocked parking areas, the court fails to
establish any clear standard as to the landlord's implied duty to
avoid interfering with the tenant.

Surely the landlord has some inherent right to enjoy the balance of
the landlord's premises, even if such enjoyment may in some
circumstances interfere with the maximum enjoyment of the tenant's
premises. For instance: could the landlord lock the main doors to the
premises after regular working hours in order to protect the bank's
security, even though this led to some inconvenience for the tenant?
Is this a question of a reasonable balance of the bank's interests vs.
those of the tenant, or does the tenant have some higher priority
right?

In the residential area, to which the court analogizes, courts had
already shifted a substantial burden of maintenance and support to the
residential landlord, so the questions of duty were less difficult.
Here the court tries to create an implied duty of "non-interference
with habitability" without really indicating what standards ought to
apply. The rule has been that there was liability if the landlord
actually or constructively barred the tenant from using the premises,
but even here, the tenant had to show that the eviction was caused by
some failure of the landlord to perform a lease duty. Now the tenant
need only show interference with its business. What duty, exactly,
does the landlord owe?

One answer is that the landlord, in using its own premises, ought to
be evaluated by the general concepts of common law nuisance. It has a
right to use its premises as much as its tenant has a right to use the
leased premises. There might be an overlay for privileges and
protections that the parties reasonably should have expected would be
available for the tenant to make practical use of the property leased
- modernly many courts refer to this as the "landlord's implied duty
of good faith and fair dealing."

If the court here is suggesting a standard higher than the one
proposed above, the case is news. But we'll have to wait for the
second appeal, if there is one, to be sure.

Editor's Comment 2: The more difficult issue here is the concept that
the landlord's breach of an express or implied duty may be viewed as
a breach of the covenant of quiet enjoyment, even though the tenant is
not evicted. The covenant of quiet enjoyment traditionally has been
viewed as the one covenant in a commercial lease that is in a
"dependent" relationship with the covenant to pay rent. In other
words, if the landlord breaches the covenant of quiet enjoyment, the
tenant may withhold rent.

In short, the New Hampshire opinion may be read as installing the rent
withholding remedy into New Hampshire's common law of commercial
landlord/tenant. This, indeed would be big news.

New Hampshire landlords will have to bargain in their leases for
"anti-rent withholding" clauses. They likely will be assisted by the
fact that savvy mortgage lenders will not approve any leases that do
not contain such clauses. The net effect likely will be very little
change in practice, but perhaps landlords will have to give up
something else at the bargaining table because the "default" reading
of the lease has tilted a little bit more toward the tenant.

Editor's Comment 3: Note that the court didn't have to use the implied
warranty of quiet enjoyment to uphold the right of the tenant to claim
damages. The breach of an implied covenant of good faith and fair
dealing, or even a claim in nuisance, would have been sufficient to
support an independent damages claim. It may be that this is really
all the court is saying, and that it is not condoing a rent
withholding remedy. New Hampshire lawyers ought to press the court on
this point in future cases.

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